The UK government has delayed the introduction of changes to the personal injury claims process to August 1, 2020.
The reform is designed to reduce the number of whiplash claims and the consequent cost.
The online portal is designed to allow victims to file a claim without requiring legal support and was the centrepiece of the reform due to be in operation from April 2020.
The new small claims portal
The Motor Insurers’ Bureau (MIB) is developing this new portal on behalf of the Ministry of Justice (opens a new window)expecting it to offer a “simple, user-friendly and efficient online route to provide those affected by road traffic accidents with an opportunity to settle small claims for personal injury without the need for legal representation or to go to court.”
Where a claimant is not able to make a claim online, there will be the option to do so on paper. A dedicated customer contact centre will be available to support all customers through the journey if necessary, according to the government.
As a result of Alternative Dispute Resolutions (ADR) not being practicable in those scenarios where insurers do not accept liability, the ADR will not form part of the online portal. As an alternative, the government will ensure access to justice by developing “bespoke processes to enable litigants to go to court to establish liability.”
In terms of insurer’s stance towards accepting liability for damages, the government does not see this changing post implementation which means, motor insurers should still be accepting liability for damages for the majority of whiplash claims post road traffic accidents.
The new portal will be run separately from the existing claims portal which is used for higher-value (‘fast track (opens a new window)’) claims.
Increase in small claims limit
The small claims track limit will increase from £1,000 to £5,000 for road traffic related accidents. As a result, if a person hires a legal representative to make a personal injury claim below £5,000, their legal fees will not be recoverable from the compensating insurer.
With regards to the increase in the small claims track limit, there are certain individuals where this change will not apply being “vulnerable road-users” (such as: motor-cyclists, cyclists and pedestrians). Similarly, the fast track will not apply to children or protected parties in order to allow the government to test the process and make any required corrections prior to a wider use. Since they are not subject to the new small claims limit, these individuals will not have access to the online service.
Until such time they can access the online portal, the normal track for claims by children and protected individuals (including whiplash injuries) will be the fast track which are not allocated to the small claims track. Therefore, for now, these claimants will be able to instruct a legal representative who may obtain a medical report on their behalf and their costs of legal representation will remain recoverable.
Change in tariffs
The reform programme (opens a new window) (including measures in Part 1 of the Civil Liability Act 2018) introduces a fixed tariff of damages a court may award for pain, suffering and loss of amenity for those whiplash injuries sustained in a road traffic accident. In addition to this, the reform has introduced a ban on the making or accepting of offers to settle a whiplash claim without a medical report.
According to the Financial Times, the new tariff is expected to be (opens a new window) much lower than claimants can receive under the current system. The amount payable for an injury lasting 9-12 months, for example, could fall from £4,000 to £1,250.
The government is planning to lay the statutory instrument in parliament to introduce the tariff of damages for whiplash injuries. The necessary rules and pre-action protocol, and the statutory tariff, will be published in “sufficient time before implementation (opens a new window)”.
Conclusions
It is too early to speculate how these changes will impact insurance costs and how insurers are likely to react, not least due to several other factors affecting motor insurance pricing.
In general, the small claims limit increase and the introduction of new tariffs is likely to lead to more cases being processed as small claims. For these, insurers will no longer need to cover legal expenses. While this could theoretically reduce insurers’ cost and therefore premium, other factors may counterbalance this favourable trend. There is, for example, the discount rate change from July 2019 to -0.25% with many expecting this change to be higher. As a result, insurers were required to keep higher than expected reserves for lump sum damages related to fatal and serious injury claims. Furthermore, insurers are facing higher reinsurance costs with many motor insurers facing claims inflation in respect of repair costs and spare parts to name a couple.
Lockton is monitoring the market closely and will inform clients as soon as there are new developments in this area.
For further information, please contact:
Matthew Sinden, Casualty Broker
Direct Tel: + 44 (0) 20 7933 2094
Email: Matthew.Sinden@uk.lockton.com (opens a new window)
